27Jun
Factoring helps these companies manage their cash flow by providing immediate funds based on their freight invoices. Interestingly, transportation companies often enjoy the highest advance rates from factoring companies (90%-96% or higher), which means more cash upfront to help pay for: Fuel. Maintenance and repairs.
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How does factoring work?
In finance, factoring refers to a financial transaction where a business sells its accounts receivable (invoices) to a third party at a discount. That third party, called a factor, then assumes the responsibility of collecting payments from customers
Mainly, this strategy allows your business to receive cash quickly rather than waiting for customers to pay their invoices. If there are particularly long payment terms or customers are late making their payments, it could leave you in limbo until they pay up and be especially challenging if you need funding now.Instead of taking out a loan, factoring emerges as a way to gather cash when needed without the burden of debt or high interest rates. It can help businesses improve cash flow and manage their working capital more effectively and is commonly used by businesses with many outstanding invoices that need to cover expenses or invest in growth opportunities immediately.
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